2016 (4) TMI 672 - AT - Income Tax

Determination of income - Held that - Income of the Hajj firms floated by the M/s Alhind Tours and Travels Pvt. Ltd. is to be assessed in its hand only.The present order shall only be used for the purposes of determining the disallowance under the head food and accommodation expenses.

Summary

Issues Involved:
1. Disallowance of excess food and accommodation expenditure.
2. Estimation of profit per person for Hajj services.
3. Comparison with non-profit organizations for determining reasonable expenses and profits.
4. Appeals against the additions made by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)].

Detailed Analysis:

1. Disallowance of Excess Food and Accommodation Expenditure:
The primary issue revolves around the disallowance of food and accommodation expenses claimed by the assessee. The AO disallowed a significant portion of these expenses due to the lack of proper bills and vouchers. The AO estimated the income by comparing the assessee's expenses with those of non-profit organizations like Kerala Hajj Group and Kerala Naduvathul Mujahideen. For instance, in the case of Kerala Islam Hajj and Umrah Services for A.Y. 2009-10, the AO made an addition of Rs. 82,74,000/- which was later reduced to Rs. 35,46,000/- by the CIT(A) as excessive expenditure.

2. Estimation of Profit Per Person for Hajj Services:
The profit per person was a critical factor in determining the reasonableness of the expenses claimed. The AO used comparable cases to estimate a reasonable profit margin. For example, in the case of Kerala Islam Hajj and Umrah Services for A.Y. 2010-11, the AO determined a profit of Rs. 6,500/- per person based on comparable non-profit organizations. The Tribunal found this estimation reasonable and applied it to other cases as well.

3. Comparison with Non-Profit Organizations:
The AO compared the assessee's expenses and profits with those of non-profit organizations to determine the reasonableness of the claims. For instance, in the case of Kerala Islam Hajj and Umrah Services, the AO compared the expenses with Kerala Hajj Group, which had a total expenditure of Rs. 1,43,500/- per person and a profit of Rs. 6,500/- per person. This comparison was used to justify the disallowance of excessive expenses claimed by the assessee.

4. Appeals Against the Additions Made by AO and CIT(A):
The assessees appealed against the additions made by the AO and sustained by the CIT(A). They argued that the additions were unjustified and that the expenses claimed were reasonable. The Tribunal, after considering the rival submissions, found that the profit per person declared by the assessees was reasonable in most cases and deleted the additions made by the CIT(A). For example, in the case of Vazco Hajj Group for A.Y. 2010-11, the AO made an addition of Rs. 92,47,433/- which was reduced to Rs. 46,82,118/- by the CIT(A). The Tribunal found the declared profit of Rs. 13,360/- per person reasonable and deleted the addition.

Conclusion:
The Tribunal dismissed all the appeals as infructuous, as it held that the income of the Hajj firms floated by M/s Alhind Tours and Travels Pvt. Ltd. should be assessed in the hands of the parent company. The present orders were used only for determining the disallowance under the head food and accommodation expenses. The Tribunal consistently found the declared profits per person reasonable and deleted the additions made by the CIT(A). The appeals were dismissed as infructuous, and the order was pronounced in the open court on 1.3.2016.